Latin America Marching to a Brazilian Beat

PODER presents its second annual ranking of the 500 most influential companies in Latin America

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Latin America is dancing samba. That’s because Brazil’s presence among the largest and most influential Latin American companies has not stopped growing. In fact, this year the giant petroleum company Petrobras took home the champion’s crown for the most influential company in the continent.

How did it do it? Simply put, Petrobras was the largest company in the fastest growing Latin American economy. It swept the rest of the PODER Latin America 500 in sales, assets, growth, and return on equity. With almost $76 billion in revenue during the first nine months of 2009, it towered above other petrogiants such as the Mexican state-owned company Pemex ($58 billion) and Venezuela’s Pdvsa ($49 billion).

But it wasn’t just sales. When we compared sales growth, we saw the Brazilian monster was able to contain losses suffered as a result of the global financial crisis and depressed oil prices better than its peers throughout the first quarter of 2009. While Petrobras’ shrunk by 13.9 percent in that period, Pemex and Pdvsa suffered chilling losses of 40.4 and 52 percent respectively.

The Brazilian firm also has the best potential for a repeat. Petrobras, a mixed public-private enterprise with a 55 percent government stake, will continue developing the deep-water Tupi oil fields off the coast of Rio de Janeiro. According to experts, the Tupi fields hold one of the principal oil reserves left on the planet and have between 5 and 8 billion barrels waiting to be pumped. Getting the oil out of the ground will be a serious technological challenge.

Deep sea drills will have to traverse 1.25 miles of water before reaching the ocean floor, then dig through as much as three miles of sand and rock before hitting a 1.25 mile salt layer covering the oil field.

The operation will cost about $170 billion and will test the recognized leadership capacities of the company’s CEO, Sergio Gabrielli. His guidance has helped Petrobras become a global force. The company that once thought of changing its name to Petrobrax so American investors could pronounce the name more easily, is today the fourth most important petroleum company in the world, according to the international consultancy PFC Energy. The reason behind that climb was Petrobras’ 103 percent valuation over the last year.

Petrobras also had gains in production. It saw its output grow 5.2 percent over 2008 and is looking to add another 120,000 barrels a day each year, with the goal of doubling its current production in 2020. “Despite the fact that Petrobras has significantly less reserves than Pdvsa, because of its good management the Brazilian firm’s production will surpass that of its Venezuelan rival by 2015,” says Jorge Piñon, a private consultant and ex president of Amoco Oil.

But Petrobras isn’t only after petroleum. The company also has ambitious plans to grow its ethanol business. The objective is to grow this year’s production five-fold by 2013. To that end, Petrobras has acquired an ethanol plant with capacity to produce 26.4 million gallons of ethanol a year, and the company plans to buy three more by the end of 2010.

Pemex’s future, on the other hand, is not as bright—or as clear. For decades the eyes of the state-oil company’s executives were firmly placed on Chicontepec—the oil field that holds about 40 percent of Mexico’s proven oil reserves. However, Chicontepec has proven a disappointment up until now. At the start of 2010 production was limited to 31,000 barrels a day, when the original goal was 226,000. The problem is that Chicontepec still remains the principal hope for curtailing the negative slide in production of the Cantarell oil field, which once represented two thirds of Mexico’s output. Last year Cantarell accounted for only 20 percent of the output and continues to drop at a pace of 15 percent annually.

Pemex’s production as whole has declined as a result of these two scenarios. Just five years ago, its output was 3.5 million barrels, while in 2009 it was 2.6 million. In just over a year, total production has fallen 6.8 percent. Pemex executives are now stuck without a clear back-up plan. “Pemex is trying to offset the decline in Cantarell with on-shore wells they had walked away from years ago,” says Mauricio García Palacios, an analyst with Energy Strategies in Mexico City.

The Venezuelan state-owned company Pdvsa is also suffering, though mostly as a result of poor management and Hugo Chávez’s monetary policy. The 50 percent devaluation of the local Bolivar currency brought financial relief to the company, but it hides the fact that production continues to slump. The devaluation also reduced in one swoop half of Pdvsa’s debt held in Bolivares.

After five years of an average annual inflation of 22.5 percent, Pdvsa’s payroll costs have sky rocketed. While oil was trading above $100 a barrel those inefficiencies were camouflaged. But the precipitous drop in oil prices during 2008 and 2009 made the situation unsustainable. “Pdvsa was the principal lobbyist for the devaluation; with the depreciation of the Bolivar it established a type of petroleum exchange that is double what it was before,” says Asdrúbal Oliveros, an analyst with Ecoanalítica in Caracas.

The financial reprieve aside, Pdvsa continues to show little if any positive movement in terms of production. OPEC tallies its daily output at 2.3 million barrels, while Pdvsa contends it is actually 3.5 million. Even if Pdvsa’s numbers are true, the figures reflect the same production capacity as 1998.
Looking towards the future, much of Pdvsa’s fortunes will rest in the large reserves in the Orinoco river delta. In February, Chevron and Spain’s Repsol led two groups that bid on five of seven sectors with proven reserves. None of the other major global players even made bids because of fears prompted by continuing nationalizations by the Chávez administration.

“Of the big oil companies, only Chevron and Repsol stayed in Venezuela because of the market’s potential and with the hope that current policies will change in the medium-term,” says Piñon. “The rest of the companies that participated were state-owned, whose share holders are good friends of the government.”

Oil companies aren’t the only businesses making a move, however. Behind Petrobras, Pemex and Pdvsa was América Móvil, the highest-ranking private company in the Latin America 500. We’re talking about the signature ship of a continental wireless empire belonging to Carlos Slim, the man who recently unseated Bill Gates as the wealthiest person on the planet, according to Forbes magazine.

But unlike Petrobras, América Móvil’s position among the elite is under threat. To avoid being dethroned, América Móvil has launched a $21 billion offer to acquire its sister firm, Carso Global, which operates the fixed land businesses Telmex and Telmex Internacional.

The move would help América Móvil mimic its main competitor Spain’s Telefónica, which also merged its wireless and fixed line businesses. But Slim still has to convince regulators—Colombia and Ecuador seem most likely to put up roadblocks—to approve his plans to provide voice, data and video services to the 18 Latin American markets where América Móvil currently operates.

If Slim can convince anti-trust regulators, he stands to benefit enormously. In 2009 América Móvil added 18.2 million subscribers, leaving its total client base at 201 million. And while that number is certainly enviable, its net new users in the fourth quarter (6.6 million) was the lowest in seven years, signaling Latin America may be reaching a point of wireless saturation.

Analysts believe the decline in new customers will force América Móvil to focus on launching services that differentiate it from competitors. One of the main areas for growth is in its data capacity, where sales jumped 48 percent in the fourth quarter of 2009 compared to the same period in the year prior. Brazil will most likely see the largest investments as América Móvil continues to shuffle around revenue from other countries to its Brazilian operation. This makes sense in light of the fact that the company added more customers there than in any other region.

Rounding out the top five is another telecom company, Brazil’s Oi, which is finalizing the digestion of its $6.5 billion acquisition of Brasil Telecom early in 2009. The purchase gave Oi an important market share in the wireless sector, launching the company to the upper echelons of the Latin America 500 corporate elite. It now stands toe to toe against its wireless competitors Vivo (Telefónica), Claro (América Móvil) and TIM (Telecom Italia).

At the same time Oi is consolidating its acquisition of Brasil Telecom, the company has to play catch-up. It entered the wireless market in 2002, when Vivo, Claro and TIM already enjoyed substantial market shares. Oi’s acquisition did make up a lot of ground, however, and it now has cornered 20.6 percent of the market compared to Vivo’s 29.8 percent, Claro’s 25.5 percent and TIM’s 23.6 percent.

Like América Móvil, Oi’s growth sectors will most likely not be wireless customers because cell phone penetration in Brazil has already reached more than 91 of every 100 people, analysts say. “The high levels of saturation in wireless phones in Brazil points to Oi giving priority to growing its broadband services and its pay TV,” says José Otero, president of Signals Telecom Consulting.

It’s not hard to see why. Internet connectivity lags behind global averages, with only about six of every 100 people connected to the web. Analysts expect that gap to close in a hurry as broadband connections grow by 70 percent until 2014, reaching an estimated 60 million connections.
 
[Other Trends]
Brazilian abundance in this ranking is not simply anecdotal, nor is it limited to the top five. In fact, of the 500 firms that made the ranking based on their performance, 223 are from Latin America’s largest country. Brazil is followed by Mexico (89 companies), Chile (81), Peru (44), Argentina (36), Colombia (18), Venezuela (8) and Ecuador (1).

The 2010 Latin America 500 represents companies from a wide variety of sectors. Sixty-six hail from the energy sector, followed by Food and Beverages (54), Commerce (43), and Mining (28). In all, 25 different economic sectors are represented, and in all of them—from airlines to construction—Brazilian firms stand out. That’s how it was in 2009 and that’s how it will be for the foreseeable future. Latin America will continue dancing to a Brazilian beat.

[Methodology]
The Latin America 500 were ranked using a methodology developed by PODER. By combining a set of indicators we produce an influence index that allows us to compare companies across the continent. The methodology’s objective is to detect the Latin American companies that exert the most influence over the world of business. With that in mind we combine size indicators, growth variables, revenues, assets and relative positions amongst competitors.

We looked at publicly traded companies registered in the stock exchanges of Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela. Privately held companies were included only when they made their financial information available. We also considered public or state-owned companies who made public disclosures as well.

[The indicators used to determine the ranking were]
• [Sales] Net sales between January and September of 2009.
• [Assets] Total assets as of September 2009.
• [Growth] Difference in sales figure between January and September 2008 and the same period in 2009.
• [Return on Equity (ROE)] Net profit for the period Jan-Sep 2009 divided by shareholder equity as of Sep 2009.
These variables were then given a percentage weight that combined total 100 in order to come up with an index measuring influence. Sales were assigned 40 percent, Assets 40 percent, Growth 10 percent and ROE 10 percent. Companies were also rewarded for topping out at leadership positions in their respective markets, as were companies that led strategic industries.

500 Corporations List:

1. Petrobras
2. Pemex
3. Pdvsa
4. America Movil
5. Oi (ex Telemar)
6. Ambev
7. Odebrecht
8. Gerdau
9. Vale
10. Carso Global Telecom
11. Pao Acucar
12. JBS Friboi
13. Votorantim
14. Wal Mart de Mexico
15. Telmex
16. Ecopetrol
17. Tam
18. Marfrig
19. Ultrapar
20. Enersis
21. Cyrela Realty
22. Femsa
23. Braskem
24. Cantv
25. CSN
26. Petroecuador
27. Telesp
28. Endesa
29. Eletrobras
30. BRF Foods
31. Equatorial
32. Tele Norte Celular
33. Techint
34. Cemig
35. Vivo
36. Bimbo
37. E. Públicas de Medellín
38. CPFL Energia
39. Escondida
40. LF Tel
41. Telcel
42. Embratel Participacoes
43. Jereissati
44. CCR Rodovias
45. Cemex
46. Codelco
47. Gafisa
48. Camargo Correa
49. Aracruz
50. CFE
51. Embraer
52. Neoenergia
53. Quiñenco
54. PDG Realty
55. Cesp
56. Televisa
57. Telmex Internacional
58. Net
59. PF Luz
60. Carrefour Brasil
61. Eletropaulo
62. Fibria
63. Tenaris
64. Cemar
65. Sabesp
66. Antarchile
67. Coca Cola Femsa
68. Suzano
69. Brookfield
70. Copec
71. YPF
72. Brasil Telecom
73. Rede Energia
74. Comcel
75. GM México
76. AES Elpa
77. Cencosud
78. Souza Cruz
79. Suzano Papel
80. Cosan
81. Gol
82. Tim
83. Odebrecht Construcción
84. BAL
85. Copel
86. Tractebel
87. Lojas Americanas
88. Falabella
89. Nissan México
90. Coelba
91. VBC Energia
92. Yanacocha
93. Walmart Brasil
94. Usiminas
95. Grupo Modelo
96. Ternium
97. Coca Cola Brasil
98. CGE
99. Claro Telecom Brasil
100. Chrylser México
101. Lan Airlines
102. Grupo México
103. Klabin
104. MRV
105. Chilectra
106. CCU
107. Light
108. Hypermarcas
109. GM Brasil
110. Tran Paulist
111. Telefónica del Perú
112. Natura
113. Casas Bahia
114. Duratex
115. CPFL Geracao
116. Bodega Aurrerá
117. Energias Brasil
118. Codensa
119. Cargill Argentina
120. Nestlé Brasil
121. Unipar
122. Weg
123. Magnesita
124. CMPC
125. Alfa
126. Movistar Venezuela
127. ICA
128. Telecom Argentina
129. America Latina Logistica
130. Nacional de Chocolates
131. Grupo Elektra
132. Walmart Supercenter
133. Volkswagen Brasil
134. Celpe
135. Southern Perú Cooper
136. OHL Brasil
137. Bunge
138. Grupo Salinas
139. Copasa
140. Comgas
141. Gruma
142. AGconcessoes
143. Elektro
144. Energisa
145. Pequiven
146. Sao Martinho
147. Grupo Carso
148. SMU
149. Petrobras Energía
150. Minera Barrick
151. Minera Valparaiso
152. Aguas Andinas
153. ENAP
154. AES Tiete
155. Kimberly Clark México
156. Gener
157. Organización Soriana
158. Rossi Residencial
159. Ford México
160. GVT Holding
161. Entel
162. Brasil Malls
163. Ford Brasil
164. Éxito
165. Movistar Argentina
166. Celpa
167. Ideal
168. Ampla Energia
169. D&S (Walmart Chile)
170. Buenaventura
171. La Electricidad de Caracas
172. Guarani
173. SPCC Perú
174. SQM
175. Terna
176. Movistar Perú
177. Coelce
178. Industrias Peñoles
179. Inepar
180. Tenda
181. Sanepar
182. Puerto de Liverpool
183. Argos
184. Shell Brasil
185. Whirlpool
186. Fiat Brasil
187. Colbun
188. Cerro Verde
189. CTI – Claro
190. Celesc
191. Empresas Polar
192. Telefonica
193. Multiplan
194. Comercial Mexicana
195. Mexichem
196. CEEE-D
197. Telecom Personal
198. TGP
199. Desarrollo Homex
200. Cemat
201. Dias Branco
202. Pampa Energía
203. Even
204. Corporación GEO
205. Anglo American Chile
206. Ger
207. CPFL Piratininga
208. Grupo Iusacell
209. Altos Hornos de México
210. Gold Fields La Cima
211. Grupo Clarín
212. Sedapal
213. Bandeirante Energia
214. Industrias CH
215. Coppel
216. Urbi
217. Tenedora Nemak
218. Telefonica Argentina
219. Gasco
220. Tecnisa
221. Embotelladora Arca
222. RGE
223. Disco
224. Siderar
225. B2W Varejo
226. Sigdo Koppers
227. Amil
228. Aceitera General Deheza
229. Grupo Simec
230. Grupo Sigma
231. Antamina
232. Klabin Segall
233. CEG
234. Anhanguera
235. Arcor
236. Minerva
237. CEEE-GT
238. Telefónica Colombia
239. Escelsa
240. Sao Carlos
241. Cap
242. Ripley
243. Shell Argentina
244. Vitro
245. MMX
246. Petroperú
247. Fertilizantes Heringer
248. Avianca
249. Grendene
250. La Polar
251. Industrias Bachoco
252. Cementos Chihuahua
253. AES Sul
254. Edegel
255. Totvs
256. Quattor Petroquímica
257. Triunfo Part
258. Xignux
259. Eztec
260. Agrosuper
261. Masisa
262. Agra Incorp
263. Alpargatas
264. Barrick Misquichilca
265. Grupo Aeroportuario del Pacífico
266. Grupo Gigante
267. Guararapes
268. Dasa
269. Electroperú
270. Randon
271. TV Azteca
272. Helbor
273. UCP Backus & Johnston
274. Aluar
275. Localiza
276. Wembley
277. Marcopolo
278. Sivensa
279. SLC Agricola
280. Coteminas
281. Danone Argentina
282. Prom Y Op de Infra
283. Carbones del Cerrejón
284. Grupo Famsa
285. Quemchi
286. Carrefour
287. Molinos Río
de la Plata
288. Minsur
289. Luz del Sur
290. Confab
291. Americel
292. Springs
293. Globex
294. Lupatech
295. Andina
296. Elecmetal
297. Paranapanema
298. Axtel
299. AJE
300. Vapores
301. Volcán
302. Grupo Palacio de Hierro
303. Enami
304. Edelnor
305. Drummond
306. Cosern
307. Inpar
308. Megacable Holdings
309. Contax
310. Concha y Toro
311. Lojas Renner
312. Direcional
313. Fosfertil
314. Enersul
315. Grupo Kuo
316. Trisul
317. Emel
318. Esval
319. Gas del Sur
320. Santos Brasil
321. Carso Infraestr.
322. Banmedica
323. Tupy
324. Eucatex
325. Grupo Lamosa
326. Positivo Informatica
327. Hering
328. Cristales
329. Fer C Atlant
330. Embonor
331. Carozzi
332. Caraiba
333. Edenor
334. Aero. del Sureste
335. Vulcabras
336. Alicorp
337. Ferrocarril Mexicano
338. Grupo Saba Casa
339. Molymet
340. Salfacorp
341. Essbio
342. Drogasil
343. Azevedo
344. Pehuenche
345. Casan
346. Rodobensimob
347. Viña San Pedro
348. Marisa
349. Consorcio Ara
350. Usin C Pinto
351. C. Durango
352. Uol
353. CGE Distribución
354. Acos Vill
355. Movistar Colombia
356. Dixie Toga
357. CIE
358. Cablevision
359. Company
360. Grupo Continental
361. Besalco
362. Cementos Lima
363. Inforsa
364. C. Chilena de Tabacos
365. DOE RUN
366. Cementos Biobio
367. VTR
368. Refineria La Pampilla
369. Corporación Moctezuma
370. Celulose Irani
371. Vicunha Textil
372. Maseca
373. Edesur
374. Enaex
375. Kroton
376. Forjas Taurus
377. Bardella
378. Grupo Posadas
379. Gloria
380. Santos Brasil
381. Camargo Correa D. Inmobiliario
382. TMM Grupo
383. Sonda
384. Socovesa
385. Abnote
386. Fasa
387. Enersur
388. Grupo ISA
389. Ferreyros
390. Shougang Hierro Perú
391. JHSF Part
392. Repsl YPF Perú
393. Pronor
394. CVG Venalum
395. Seb
396. J.R. Lindley
397. Pluspetrol Camisea
398. Yara Brasil
399. Edelnor
400. M.G. Poliester
401. Mangels Ind.
402. Cr2
403. Iochp-Maxion
404. Profarma
405. Sare
406. Medial Saude
407. Saraiva Livraria
408. Herdez
409. Olimpica
410. Tegma
411. Madeco
412. T. de Gas del Norte
413. Corporativo Fragua
414. Portobello
415. Metal Leve
416. Coca Cola Polar
417. Industrias Romi
418. Saludcoop
419. Supermercados Peruanos
420. Estacio
421. Petropar
422. Elecda
423. Oma
424. Copamex
425. Milpo
426. Aeropuertos Argentina 2000
427. Transener
428. Eternit
429. Fleury
430. Watt’s
431. Metrogas
432. Editora El Comercio
433. Cementos Pacasmayo
434. Odontoprev
435. Providencia
436. Pucobre
437. Enjoy
438. Coloso
439. Genomma Laboratorio Int.
440. Solvay Indupa
441. Campos Chilenos
442. Log-In
443. Itata
444. Austral Group
445. El Brocal
446. Chevrom Colombia
447. BP Exploration
448. Iansa
449. Dimed
450. Saga Falabella
451. Cydsa
452. Grupo Moderna
453. Tempo
454. Embotelladoras Unidas
455. Corpesca
456. Marisol
457. Yura
458. Corp. Aceros Arequipa
459. Millennium
460. Duncanfox
461. Cremer
462. Clinica Las Condes
463. Naviera
464. Hidroelectrica Piedra del Aguila
465. Ferbasa
466. Fras-Le
467. Eluma
468. Gas Natural Ban
469. Tivit
470. Juan Minetti
471. Real Turismo
472. Maxcom Telecom
473. Santa Rita
474. Anasac
475. Endesa Costanera
476. Siderperú
477. Bombril
478. Le Lis Blanc
479. Schulz
480. Alsea
481. Metalfrio
482. Bematech
483. San Luis Corp
484. Detroit
485. Teka
486. CSU
487. Maestro Home Center
488. Grupo Mexicano de Desarrollo
489. Iguacu Cafe
490. La Patagonia
491. Plascar Part
492. Emdersa
493. Agunsa
494. San Miguel
495. Andrómaco
496. Grupo Bafar
497. Polpaico
498. Josapar
499. Lafarge
500. Accel